Seed CX Subsidiary Adds Crypto Derivatives Settlement for Institutions

Specifically, Seed CX subsidiary Zero Hash – the company’s custodian and settlement service provider – will now support derivatives transactions, the firm announced Wednesday, opening the door for institutions to settle derivatives on its platform.

Crypto derivatives platform Seed CX is launching support settlement services for bilateral crypto derivative transactions.

According to a press release, Zero Hash will support back-office settlement functions for bitcoin forwards contracts initially, but will add support for options at a future date.

This support for forwards will include “the calculation of variation margin, initial margin and final settlement values, the sending of margin-call notifications and the movement of funds, significantly reducing operational and counterparty risk”, according to Zero Hash.

Additionally, the service will allow institutions to customize the settlement of forwards contracts – for example, deciding the frequency of calculations – to provide “greater flexibility” for investors.

Zero Hash president Brian Liston noted that derivatives are increasingly in demand in the U.S., adding:

“We’re excited to service that demand with the launch of this new functionality. Zero Hash can now enable any trading platform or set of participants to trade and settle forwards in an efficient and secure manner.”

Seed CX has been building toward its physically-settled bitcoin forwards product for some time, announcing its intention last year. The exchange launched a spot bitcoin trading market in January 2019, and began testing its margin swaps product last month.

Two of Seed CX’s subsidiaries, Zero Hash and Seed Digital Commodities Market, have been granted New York’s coveted BitLicense as well.

The company faces stiff competition, however: Tassat (formerly trueDigital) also intends to offer bitcoin forwards, while LedgerX, ErisX (backed by TD Ameritrade) and Bakkt (a new subsidiary of the Intercontinental exchange) are all looking to launch physically-settled bitcoin futures contracts.

Of these, only Bakkt has a firm launch date set, for later this month.

Like Seed CX, Bakkt intends to offer margin on its bitcoin derivatives products, announcing Tuesday that customers would have to make an initial deposit of $3,900 (for hedging) or $4,290 (for speculating) to open a position.

Seed CX Expands European Presence With Euro-Crypto Order Books

Seed CX is expanding its European services with the addition of eight order books for its spot-trading market.Seed Commodities Market, the Chicago-based firm’s spot market, announced Monday it has created euro trading pairs against bitcoin, ether, litecoin, bitcoin cash, Paxos dollar, TrueUSD, USDC and the U.S. dollar. It’s also expanding trading hours to 24/7.

The new order books were launched in response to demand from Seed’s European traders, said Brian Liston, president of the spot market division.

“We have a lot of traders who are in Europe and Asia and we wanted to cater to those clients and make it extremely relevant”, he told CoinDesk. “People who are predominantly focused on euro books like our liquidity, our prices, our infrastructure but they just want to trade these order books.”

The company will now focus on building volume for the new books, which have already been live for a week. Further down the line, Liston envisions adding yen-denominated pairs – including an order book for YEN/USD.

“That creates an interesting strategy because not many places offer FX foreign exchange in more than one denominated book”, he said.

According to the Commodities Futures Trading Commission’s list of Swap Execution Facilities, Seed CX’s SEF registration went dormant in September 2019. An SEF registration allows companies in the U.S. to trade derivatives products.

A CFTC fact sheet said SEFs are considered dormant if they have traded any derivatives in the past 12 months, and have been in operation for at least three years. Seed CX received its SEF in August 2016. It can reinstate the registration by filing documents with the CFTC.

Seed decided to focus on its spot trading and settlement due to the large number of derivatives exchanges currently in the market, according to Liston.

Seed Digital Commodities settles through Zero Hash, Seed CX’s subsidiary focused on custody and settlement. Zero Hash can support most currencies used in G20 nations, and would be able to add new order books quickly if there is sufficient demand, he said.

“We still have a good relationship with the CFTC and are keeping our options open”, Liston said. “However, we’re focusing almost all of our effort on the digital commodities market.”

The firm’s new 24/7 operations also come in response to existing demand, he said.

“What we’ve just done is launch trading over the weekend and a lot of crypto is 24/7 but our exchange was five days a week”, he said. “A lot of it was settlement and working with banks.»

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